An
increasing number of hourly workers in the United States are required to first
pay a fee in order to receive their wages, a report says.
The employers of
these mostly hourly workers have started to issue prepaid cards instead of
ordinary paper paychecks and direct deposit. In most cases, workers themselves are
required to cover the costs, the New York Times reports.
To withdraw
their pay, employees can use these payroll cards like a credit card at an A.T.M
machine.
But, fees
quickly add up; for instance, one provider charges $1.75 to allow a withdrawal
from most A.T.Ms, $2.95 for a paper statement and $6 to replace a
card.
Even those who
do not want to use their cards have to pay $7 inactivity
fees.
As a result,
some workers end up earning less than the minimum wage when taking into account
the charges, according to consumer lawyers, employees and state and federal
regulators.
The report cites
Devonte Yates, who earns $7.25 an hour working a drive-through station at a
McDonald’s in Milwaukee, Wisconsin. He said he now spends $40 to $50 per month
on fees related to his JPMorgan Chase payroll card.
A majority of
workers say they have to use the cards as many companies do not offer common
payroll options such as checks or direct deposit.
Among the
companies which issue prepaid cards for their employees are Taco Bell, Walgreen
and Wal-Mart among other large companies.
The use of
payroll cards is gaining momentum at a rapid pace. In 2012 alone, $34 billion
was loaded onto 4.6 million active payroll cards, according to the research firm
Aite Group.
Even in
companies where employees have a choice, they are often automatically enrolled
in the payroll card program and have to deal with a pile of paperwork if they
want to opt out.
But for banks
that seek to compensate for billions of dollars of losses incurred from a spate
of recent limits on debit and credit card fees, the payroll cards option can be
lucrative, according to banking analysts.
It is estimated
that by 2014, $60 billion in wages be paid through payroll
cards.
AT/HJ
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